Deep Polymers Limited

Started in 2005, Gujarat based Deep Polymers Limited is a company engaged in the business of manufacturing color and additive masterbatches including antifab fillers, transparent fillers and color fillers etc. The products are used in engineering plastics and compounds and are cost-effective replacements for polymers. The company started its facility at Ahmedabad to manufacture plastic masterbatches with 600 MT productions per annum in the year 1992. Today, it has achieved production of color masterbatches and filler masterbatches of 12,000 MT and 25,000 MT respectively. As per financial performance, company has posted total income/net profits of Rs. 34.73 cr. / Rs. - (0.36) cr. (FY14), Rs. 41.14 cr. / Rs. 0.67 cr. (FY15), Rs. 36.01 cr. / Rs. - (0.35) cr. (FY16), Rs. 42.74 cr. / Rs. 1.28 cr. (FY17) and Rs. 41.10 cr. / Rs. 2.15 cr. (FY18). Company's financial not looks impressive and it had incurred losses in FY14 and FY16. Also top-line and bottom line remained zig-zag all these years and than sudden rise in bottom-line in FY18 raises concerns. For last three fiscals, it has posted an average EPS of Rs 1.52 and an average RoNW of 8.34%. Issue is priced at P/E of around 22 and P/BV of 2.04 based on its NAV of 19.57 as on 31.03.18. As per prospectus, it has shown Plastiblends and Clariant Chemica as its listed peer, but it can't be compared strictly.  On BRLM's front, for Gretex Corporate Services Pvt Ltd this is the 13th IPO and from last 10 IPOs, 1 opened below issue price, 4 at par and other listed with 1% to 5% premium on the day of listing. As of now, from last 10 IPOs, 6 are trading below issue price and remaining above issue price. ( As on 03.08.18 ) As per financials, company's performance remained zig-zag, RoNw is 8.34% for last three fiscals and issue is fully priced as per latest earnings. Sudden rise in bottom-line for FY18 raises concerns and Performance of BRLM is poor. So we give AVOID rating to this SME IPO as per current market situation.

• 1 Mr Rameshbhai Bhimjibhai Patel